Liquidator Interview of Director

A Liquidator interview of Director is an information and fact gathering exercise to reconstitute knowledge and reconstruct records. It is therefore to discover the truth of the circumstances of the company in liquidation’s insolvency and to bring its affairs into order.

As was put by then Nourse LJ. in Cloverbay Ltd (joint administrators) v Bank of Credit and Commerce International SA [1991] 1 All ER 894: “… the first duty of an office-holder is to preserve and get in the assets of the company, a duty which necessarily requires him to obtain information from others.

The Directors are under a mandatory statutory obligation due to Section 235 of the Insolvency Act 1986 to attend on the Liquidator at such times as the Liquidator reasonably requires.

A Liquidator enters office as a stranger to the affairs of the company in liquidation. A common request from Directors who are called upon to attend an interview with the Liquidator is advance notice of a list of questions.

It is difficult to provide a list of questions as many questions will be unknown given the nature of fact finding interviews ie. answers to questions invariably leads to further questions, which cannot be pre-determined in advance of the answer to the earlier question(s). A list of general topic areas likely to be covered in such a meeting may be provided if requested.

Potentially useful guidance on this issue is set out in the following cases:

  • Re Rolls Razor Limited [1969] 2 ALL ER 1386, where it was stated by Megarry J: “There may well be some cases in which it would plainly be oppressive or unreasonable not to submit written questions first. There will be other cases in which there plainly ought to be an oral examination without the prior submission of any written questions. Between these two categories there may be many cases in which the Court must determinate which cause is best suited to discover the relevant facts without being oppressive, vexatious or unfair. In order to do this, the Court must … look at the facts of the case as a whole, without yielding to preconceptions; and in doing this, the Court should give all proper weight to the views of the liquidator without, of course, abandoning the proper exercise of its discretion, of treating the liquidator’s views as being in any way decisive of the matter.”

  • Nyathi and Others v Cloete NO and Others (2012/7667) [2012] ZAGPJHC 154; 2012 (6) SA 631 (GSJ): “A written interrogatory, in my view, would be appropriate where, for example, the information sought is merely formal in nature. A written interrogatory as a precursor to oral examination may in certain circumstances be appropriate. But where the liquidation of a company is prima facie the result of mismanagement or where fraud and theft on the part of the directors and other officers of the company appear to have led to the demise thereof, the submission of written questions will undoubtedly undermine the object and purpose of the enquiry. The directors and other officers of the company are the “only eyes, ears and brains of the company and often the only persons who have knowledge of the workings off the company” and the liquidators, not having any prior knowledge thereof are strangers to the affairs of the company and therefore reliant on the oral examination and cross-examination of witnesses to delve for and hopefully discover the truth concerning the affairs of the company. In Lynn NO Hurt J dealt with it as follows: “It is very often of fundamental importance for the liquidator of a company to find out what has been done with the assets of that company and how the company’s business has been run. Speed is of the essence of effectiveness in such an enquiry because, all too often, the liquidator must take early and urgent action in order to recover mismanaged or misappropriated assets for the benefit of creditors. … I cannot conceive of any other procedure which would enable liquidators, effectively and efficiently, to fulfil their task.”